DR 98-199
Northern Utilities, Inc.
Petition for Sale of Property
Order Approving Sale of Gosling Road Lateral
to Granite State Transmission, Inc.
O R D E R N O. 23,148
February 19, 1999
APPEARANCES: LeBoeuf, Lamb, Greene & MacRae by Susan L.
Geiser, Esq. and Paul B. Dexter, Esq. for Northern Utilities,
Inc.; Kenneth E. Traum for the Office of the Consumer Advocate;
and, Larry S. Eckhaus, Esq., for the Staff of the New Hampshire
Public Utilities Commission.
I. PROCEDURAL AND PROJECT HISTORY
On October 22, 1998, Northern Utilities, Inc. (Northern
or the Company) entered into a Bill of Sale with its affiliate,
Granite State Transmission, Inc. (Granite), both wholly-owned
subsidiaries of Bay State Gas Company, for the transfer of
Northern's Gosling Road Lateral (GRL), an existing 5,178 foot
lateral of 8 and 12 inch pipe extending from a connection with
Granite along Gosling Road and Murdock Road in Newington, New
Hampshire to the Portland Natural Gas Transmission System
(PNGTS)/Maritimes and Northeast Pipeline LLC (Maritimes)
Newington Metering and Regulator Station (Station). The
construction of the lateral from PNGTS' main line to the
Station, the interconnection with the GRL, was commenced by PNGTS
on August 28, 1998 and completed on December 15, 1998. The
Station construction commenced on August 18, 1998 and was
completed on November 10, 1998.
On October 27, 1998, Granite filed with the Federal
Energy Regulatory Commission (FERC) for a certificate of public
convenience and necessity to acquire and operate the GRL. (Docket
CP99-39-000) A copy of the petition was filed with the New
Hampshire Public Utilities Commission (Commission) on December 8,
1998.
On November 17, 1998, Northern filed a petition for
approval, if required, of the Maine Public Utilities Commission
(MPUC) (Docket No. 98-921) for sale of the aforementioned lateral
to Granite. A copy of the petition was filed with the New
Hampshire Public Utilities Commission (Commission) on December 8,
1998.
On November 17, 1998, Northern filed, pursuant to RSA
374:30, a petition for Commission approval of the sale of the GRL
to Granite.
The Staff of the Commission (Staff) promulgated a
series of interrogatories, on November 25, 1998, intended to
elicit additional information regarding the proposal and met
informally with the Company on December 4, 1998. On December 9,
1998, the Commission issued an Order of Notice, pursuant to RSA
374:30, detailing the issues raised by the petition and
establishing a Prehearing Conference for December 21, 1998 and a
procedural schedule for the duration of the proceeding.
At the duly noticed Prehearing Conference held on
December 21, 1998, the Office of the Consumer Advocate (OCA)
appeared on behalf of residential utility consumers pursuant to
RSA 363:28 II. Affidavits of publication were duly filed and the
Newington Town Clerk was notified. In accordance with the Order
of Notice, the parties and Staff provided preliminary statements
of their positions.
On December 23, 1998, the Company filed the testimonies
of Messrs. David Deans and Paul LaShoto in support of the
Company's Petition. Responses from the Company pertaining to
Technical Session Data Requests were received on December 24,
1998, at which time Northern filed a Motion for Protective Order
pertaining to Response TDR-5, which included customer usage and
billing data for Public Service Company of New Hampshire's
Schiller Plant. On January 12, 1999, the Commission issued Order
No. 23,106 granting the Motion for Protective Treatment, and
Order No. 23,107 approving the procedural schedule and adopting
Staff's recommendation that this proceeding should go forward
under both RSA 374:30 and RSA 366:3. On January 13, 1999,
Northern provided additional responses to Staff's Data Requests
of January 6, 1999.
In an effort to narrow the issues and reach a
settlement in these proceedings, the Parties and Staff met on
December 4, 1998, and December 21, 1998. A Stipulation and
Comprehensive Settlement Agreement (Agreement) was filed with the
Commission on January 27, 1999.
II. ORIGINAL POSITIONS OF THE PARTIES
1. Northern Utilities, Inc.
Northern's proposal involves a transfer of pipe from
Northern to Granite to allow Northern to receive its PNGTS
volumes into its system in the most efficient manner possible,
i.e., via Granite which has more than 35 delivery points on
Northern's system. The economic and environmental consequences
are the most significant reasons for making this proposal.
Currently, Northern receives gas transported via the Portland
Pipe Line (PPL) to Granite. Northern's contract with PPL expires
April 30, 1999. Northern's gas supply and transportation
capacity on the leased PPL pipeline will be replaced by
PNGTS/Maritimes. Northern proposes to sell the GRL to Granite at
its net book value at the date of transfer, which was
approximately $372,035 at December 31, 1998. Northern maintains
that the proposed sale is the least expensive and environmentally
preferable plan to link Granite with PNGTS/Maritimes' Newington
interconnection because the alternative interconnection between
Granite and PNGTS is approximately one mile in a densely
congested area.
2. OCA
The OCA questioned (1) whether the Company's proposal
would be the least cost alternative for Northern to receive gas
from PNGTS; (2) whether the opportunity for bypass was increased;
(3) whether the transfer price was appropriate; (4) whether there
were any safety implications; (5) whether there is a potential
for double recovery via the Cost of Gas Adjustment Clause and
Northern's base rates due to potential timing differences between
Granite's filings at the FERC and Northern's filings at the
Commission; and (6) whether Granite should bear the cost of the
extension by Northern to the Atlantic Gymnastics Training Center
to place it on a lower pressure Northern main.
3. Staff
Staff raised several issues including (1) the
relationship of this proceeding to the related proceedings before
the FERC and the MPUC; (2) the costs and environmental
considerations of alternatives to the proposed sale, including
Northern filing for a limited FERC certificate to serve as an
interstate pipeline; (3) treatment of Northern customers
connected to the GRL; (4) the risk of bypass along the GRL if
that segment becomes an interstate pipeline; (5) the status of
the PNGTS and Maritimes pipeline projects; (6) the
appropriateness of net book value as the sale price of the GRL;
(7) the costs avoided by Granite and PNGTS as a result of
approval of this petition; (8) the effect the sale will have on
Northern, Northern's customers in New Hampshire, Granite, Bay
State, present transportation customers, and transportation
service in the present and in a full or partially unbundled
environment; (9) the future relationship of Northern and Granite;
(10) whether the proposed interconnection is the best link from
both a cost and safety perspective; (11) Northern's plans
regarding the PSNH Newington metering facilities installed in
accordance with DR 91-095; (12) how safety issues along the GRL
will be addressed; and (13) whether granting the proposed
petition would be for the public good.
III. STIPULATION AND COMPREHENSIVE SETTLEMENT AGREEMENT
Northern, the OCA (together referred to as the Parties)
and the Staff, representing all of the full participants in this
docket signed a Stipulation and Comprehensive Settlement
Agreement concerning the sale of the GRL by Northern to Granite,
and as a resolution of all issues in this docket.
The Parties and Staff agreed that the transfer of the
GRL by Northern to Granite is in the public good and represents
the best combination and balance of operational, financial and
environmental considerations. The Parties and Staff further
agreed that (1) Northern will be a principal beneficiary of the
new interstate pipeline transportation capacity provided by
PNGTS; (2) Northern will experience significant operational
benefits from the transaction by provision of a source of new gas
supply for all of Northern's customers, via more than 35
interconnections with Granite, and improving Northern's system
pressures, particularly in Maine and New Hampshire; (3) of the
alternative sites that were available for consideration, the
proposal for Northern to transfer the GRL to Granite is the least
expensive to both Northern and Granite; and (4) the proposed
transfer will enable Granite to avoid substantial costs on behalf
of Northern which would have otherwise been passed on to
Northern's New Hampshire and Maine customers and to its parent's,
Bay State Gas, customers. In addition to reduced costs, among
the alternative sites that were available for consideration, the
proposal for Northern to transfer the GRL to Granite was the most
environmentally preferable.
The Parties and Staff further agreed that the transfer
of the GRL at net book value was appropriate under the
circumstances. The portion of the GRL that is currently in rate
base will be removed from Northern's rate base through the
Company's next bare steel step adjustment. Northern agreed to
provide a complete accounting of the transfer to Staff and the
OCA, subject to Commission approval.
Regarding bypass issues, the Parties and Staff agreed
that it is very unlikely that the transfer of the GRL to Granite
will create any additional bypass opportunities, although some
may occur. It is Northern's understanding that Granite will not
be soliciting any of Northern's customers for bypass along the
GRL. Northern agreed to report to the Commission and the OCA any
Granite filing with the FERC to connect a new customer to the GRL
for the next five (5) years or until such time as Granite is
acquired by Northern, whichever comes first.
At the hearing on February 4, 1999, Mr. LaShoto and Mr.
Deans testified in support of the Agreement. Mr. LaShoto
discussed alternatives to the transfer of the GRL noting their
environmental and financial infirmities. The proposed GRL
transfer, he said, balanced the need for additional supplies from
PNGTS, expected by March 1, 1999, into Northern's system, while
doing so in the least costly, best operational manner, providing
improved service and increased supplies and pressure. The cost
of the extension to serve the Atlantic Gymnastics Training Center
directly from Northern's local system will be borne by Northern,
since it is a safety issue not related to the transfer, and will
not be included in base rates until Northern files a rate case.
Northern will continue to leak survey the GRL along with its own
parallel main, as it does now, because the additional cost is de
minimis. Pursuant to a request from the bench at the hearing,
the Company has provided a letter from Granite confirming that
Granite would not be soliciting any of Northern's customers for
bypass along the GRL.
Regarding the financial impact of the transfer, Mr.
Deans testified that once the GRL is removed from rate base in
the Company's next bare steel step adjustment which is expected
sometime this fall, pursuant to Order No. 20,546 in Docket DR
91-081, Re Northern utilities, Inc., 77 NH PUC 366 (1992),
Northern's revenue requirement would be reduced by nearly
$60,000. According to Mr. Deans, once the GRL is included in
Granite's rate base, however, approximately $4,600 will be passed
on to Northern's New Hampshire customers given the present FERC
allocation formula. Mr. Deans was unaware of any specific plans
for a Granite rate case at this time.
IV. COMMISSION ANALYSIS
In Order No. 22,436 in Docket DE 95-346, Re Northern
Utilities, Inc., 81 NH PUC 1003 (1996), the Commission recognized
that Northern's process in evaluating and selecting PNGTS as a
supply resource was consistent with least cost planning.
Likewise, the Company's proposal to transfer the GRL to Granite
represents the least cost approach to an interconnection in New
Hampshire, while providing system improvements and avoiding the
environmental issues and costs associated with other
alternatives. Although the value of the GRL will remain in rate
base until the next bare steel step adjustment, the impact on
rates is de minimis in the interim, and will result in a lower
bare steel step adjustment.
The MPUC approved the transfer by its Order in its
Docket No. 98-921 on February 2, 1999. We also approve the
Agreement and the transfer of the GRL from Northern to Granite.
Inclusion of the GRL in Granite's system will enable Northern to
benefit from the additional pressure and gas supply throughout
Northern's system, and reduce the need for expensive winter
peaking supplies.
Based upon the foregoing, it is hereby
ORDERED, that the Stipulation and Comprehensive
Settlement Agreement, entered into by the Parties and Staff,
agreeing to the transfer of the GRL from Northern to Granite is
APPROVED; and it is
FURTHER ORDERED, that the portion of the GRL that is
currently in rate base shall be removed from Northern's rate base
through the Company's next bare steel step adjustment; and it is
FURTHER ORDERED, that the transfer of the GRL at net
book value at the date of the transfer is appropriate under the
circumstances; and it is
FURTHER ORDERED, that Northern shall provide a complete
accounting of the transfer to Staff and the OCA, subject to
Commission approval; and it is
FURTHER ORDERED, that Granite shall not solicit any of
Northern's customers for bypass along the GRL; and it is
FURTHER ORDERED, that Northern shall report to the
Commission and the OCA any Granite filing with the FERC to
connect a new customer to the GRL for the next five (5) years or
until such time as Granite is acquired by Northern, whichever
comes first; and it is
FURTHER ORDERED, that the main extension to serve the
Atlantic Gymnastics Training Center shall be completed as soon as
practicable with the costs of such extension not being included
in Northern's rates until Northern's next base rate proceeding at
which time the costs associated with the main shall be reviewed.
By order of the Public Utilities Commission of New
Hampshire this nineteenth day of February, 1999.
Douglas L. Patch Susan S. Geiger Nancy Brockway
Chairman Commissioner Commissioner
Attested by:
Thomas B. Getz
Executive Director and Secretary